Eurozone crisis hits German jobless figures

The eurozone crisis is now crimping the jobs market in Germany, official data showed on Thursday. The number of job seekers in Europe's top economy rose by 7,000 to 2.882 million in June compared with May, according to seasonally-adjusted figures published by the Federal Labour Agency in Nuremberg. The adjusted jobless rate, which measures the proportion of people registered as unemployed against the working population as a whole, was unchanged at 6.8 percent. In raw or unadjusted terms, headline unemployment is still coming down, with the the total number of people out of work falling by 46,174 in June from May to stand at 2.809 million, the agency calculated. The unadjusted jobless rate slipped to 6.6 percent in June from 6.7 percent in May. But analysts tend to watch the adjusted data more closely, because they iron out seasonal distortions, such as the general tendency for unemployment to decline during the spring and summer months when sectors such as the construction sector take on more workers due to the warmer weather. Unemployment in Germany has been on a downward trend for many months now, as painful labour market reforms implemented a few years ago helped steel Europe's biggest economy against the worst of the sovereign debt crisis. Nevertheless, signs are increasing that the German economy, too, is beginning to feel the pain and its resilience beginning to crack, with recent sentiment indicators all heading southwards. "The risks for the economy have increased and the labour market is showing signs of weakening," said labour agency chief Frank Weise. While the German economy grew by 0.5 percent in the first three months of this year, "early indicators such as the Ifo business climate index, the ZEW investor confidence index and industrial orders have all fallen sharply recently," Weise said. This was beginning to make itself felt on the labour market, he said. Economy Minister Philipp Roesler was adamant, however, that the labour market was not about to take a turn for the worse. "Quite the opposite: companies' willingness to hire remains high. The labour market remains an anchor of stability for our economy," he insisted. Analysts said the data sent mixed signals. "All in all,if our forecast of modest economic growth in the second half of 2012 materialises, we would expect the German labour market to stay in good shape," said Thomas Harjes at Barclays Research. "However, the impressive decline in the unemployment rate witnessed in Germany over the past few years, and in sharp contrast to developments elsewhere in Europe, has likely bottomed out," he said. Natixis economist Constantin Wirschke also saw the data as a signal that "the German labour market is losing some of its momentum." ING Belgium economist Carsten Brzeski said that while the labour market "should continue to be a, if not 'the' crucial driver of domestic demand this year... this positive impact from the labour market should peter out towards the end of the year." Most forward-looking indicators pointed to a weakening of the German labour market in the coming months. "Signs are increasing that the resilience of the German labour market is slowly cracking up," Brzeski said. Berenberg Bank economist Christian Schulz said the debt crisis was "making companies more cautious about taking on new staff. "While the fundamentally positive underlying trends continue, Germany's labour market seems to have peaked for the moment. Hiring intentions continue their retreat from historic highs," Schulz said. Dirk Schumacher at Goldman Sachs agreed. The data "signal a higher degree of caution among companies in their hiring intentions. At the same time, there is no indication that job growth is about to come to a sudden halt," he said.